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Hot Wallet Meaning

A digital asset wallet that is connected to the internet, such as a browser extension, mobile app, or an exchange account. These are the primary tools for interacting with decentralized applications (dApps), minting NFTs, and executing day-to-day transactions.

Because the private keys are stored on a networked device, they are considered "hot" and thus more vulnerable to compromise. If the host device is infected with a keylogger or a remote access trojan, the funds can be drained.

Consequently, users are generally advised to only store small amounts of capital in these wallets. Despite the risks, hot wallets are the gateway to the ecosystem.

They provide the agility needed to react to market changes and participate in governance. Modern hot wallets often integrate biometric security and multi-party computation (MPC) to add layers of protection without sacrificing the speed that defines them.

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